Top 5 Things to Look For In a Managed Forex Account
When selecting potential forex investment opportunities there are many things to consider. Here are five things that we consider should be uppermost in the minds of potential investors in managed forex products. This is by no means a comprehensive list but is a sound basis from which to build a successful Managed Forex portfolio.
1) Complete Control of Your Funds
Without a doubt the one key factor in sourcing a managed forex account is to make certain that you have control over your funds at all times. That is the ability to revoke the ability of the trader to actively trade your account and also to withdrawal your funds from the broker at any time. Any other arrangement leaves your account open to abuse, fraud or general trader negligence. There has been many managed forex scams in recent times where funds have been fraudulently misappropriated leaving investors with little or nothing in their account. Make sure that before you send funds you are provided with an LPOA or "Limited Power of Attorney" form and that any funds you send are directed to the account of the broker, who is authorized to receive client deposits.
2) Historical Performance
To guage whether a trader is truly consistent you need to able to see at least 2 years worth of history or more. That process alone should rapidly reduce the field of prospective managed forex account companies by 99%. If they cannot supply orginal trading statements from a broker, preferably live, then there is a very high probably that their figures are bogus. Time after time I have witness companies and individual traders offer up impressive figures only to then witness them completely destroy a trading account in quick time. Don't let it be your account.
3) Good Money Management
Perhaps the most important and most overlooked part of forex trading is Money Management. You can be using the best trading strategy in the world, but if your money management is not right you can still end up losing money. It is often said that money management is the key difference between how the pros trade and how an amateur trades. Money management takes discipline and focus but the reality is that very few traders have the discipline to practice sound money management principles.
4) The Broker
Never overlook the importance that your broker has in determining a successful trading outcome. Often I have witnessed trading systems excel on some brokers whilst completely tanking on others. The broker should be able to provide competitive spreads or commissions on trades, as well as be able to process any deposits and withdrawals in a timely fashion. Delays in processing withdrawals and deposits can be both expensive and time consuming. Look on the internet forums for broker recommendations. There are many good forums that give an unbiased opinion in regards to brokers. Do you own due diligence on the broker specified by the managed account provider and make sure that they come recommended.
5) Low Past Draw Down Figures
Before you start with a managed forex account check out what their lowest historical draw down figure is. If they have drawn down more than 30% I would be seriously reconsidering whether it is a viable strategy to use. If it is more than 40% don't even consider it. You then need to decide on what kind of draw down figure you are comfortable with. This comes down to your own risk tolerance and nobody can really answer this question for you. So many times I have witnessed people let their trading account get traded down to nothing before they act. I am not sure what is going on there, but you really need to have a figure set in stone that you are not prepared to go beyond. Flexible rules invariably get broken, so decide on a figure, I would suggest somewhere between 15 to 30% and stick with it. - 23210
1) Complete Control of Your Funds
Without a doubt the one key factor in sourcing a managed forex account is to make certain that you have control over your funds at all times. That is the ability to revoke the ability of the trader to actively trade your account and also to withdrawal your funds from the broker at any time. Any other arrangement leaves your account open to abuse, fraud or general trader negligence. There has been many managed forex scams in recent times where funds have been fraudulently misappropriated leaving investors with little or nothing in their account. Make sure that before you send funds you are provided with an LPOA or "Limited Power of Attorney" form and that any funds you send are directed to the account of the broker, who is authorized to receive client deposits.
2) Historical Performance
To guage whether a trader is truly consistent you need to able to see at least 2 years worth of history or more. That process alone should rapidly reduce the field of prospective managed forex account companies by 99%. If they cannot supply orginal trading statements from a broker, preferably live, then there is a very high probably that their figures are bogus. Time after time I have witness companies and individual traders offer up impressive figures only to then witness them completely destroy a trading account in quick time. Don't let it be your account.
3) Good Money Management
Perhaps the most important and most overlooked part of forex trading is Money Management. You can be using the best trading strategy in the world, but if your money management is not right you can still end up losing money. It is often said that money management is the key difference between how the pros trade and how an amateur trades. Money management takes discipline and focus but the reality is that very few traders have the discipline to practice sound money management principles.
4) The Broker
Never overlook the importance that your broker has in determining a successful trading outcome. Often I have witnessed trading systems excel on some brokers whilst completely tanking on others. The broker should be able to provide competitive spreads or commissions on trades, as well as be able to process any deposits and withdrawals in a timely fashion. Delays in processing withdrawals and deposits can be both expensive and time consuming. Look on the internet forums for broker recommendations. There are many good forums that give an unbiased opinion in regards to brokers. Do you own due diligence on the broker specified by the managed account provider and make sure that they come recommended.
5) Low Past Draw Down Figures
Before you start with a managed forex account check out what their lowest historical draw down figure is. If they have drawn down more than 30% I would be seriously reconsidering whether it is a viable strategy to use. If it is more than 40% don't even consider it. You then need to decide on what kind of draw down figure you are comfortable with. This comes down to your own risk tolerance and nobody can really answer this question for you. So many times I have witnessed people let their trading account get traded down to nothing before they act. I am not sure what is going on there, but you really need to have a figure set in stone that you are not prepared to go beyond. Flexible rules invariably get broken, so decide on a figure, I would suggest somewhere between 15 to 30% and stick with it. - 23210
About the Author:
Brendan Wilson is a forex trader with 12 years experience. Brendan is also associated with Forex Managed Accounts. Managed Forex Trader provides information and services to people interested in investing in Forex these can be view at Forex Managed Account Reviews.
posted by X - Men @ 8:35 AM
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